"The third quarter of 2009 saw the announcement of many new mobile devices, including several Android smartphones ready for the holiday season in the fourth quarter, but hardware commoditisation and the growth in open platforms will make it harder for them to stand out," said Carolina Milanesi, research director at Gartner. "Meanwhile, the channel slowed its inventory-reduction efforts so while some sales volumes increased, average selling prices (ASPs) stagnated. We expect pressure on ASP to continue into 2010."

"Many devices will reach the market in time for Christmas, and mobile carriers will run incentives for consumers during the holidays. We expect sales of mobile devices in the fourth quarter of 2009 to show year-over-year growth," said Ms Milanesi. "As many vendors and industry watchers call for a decrease in sales into the channel, our sell through data is showing that 2009 performance will be flat rather than down over 2008."

Grey-market sales are no longer limited to China. All manufacturers have to compete with gray-market players as they expand into emerging markets in Asia/Pacific, Eastern Europe, The Middle East and Latin America. Grey-market devices are no longer just ultra-low cost models. Gartner has torn down several grey-market products that showcase enhanced-phone features.

Open platforms have been a hot topic in 2009 At first they appear to spell an end to market fragmentation, but when manufacturers adopt a standard software platform, they risk losing the ability to differentiate themselves. As a result, individual open platforms will fragment as manufacturers strive to compete. Android already demonstrates this trend: individual manufacturers have deployed their own user interfaces such as HTC Sense and some like Motorola's Motoblur, go deep into the part of the operating systems (OS) that manages contact information.



Nokia's market share declined 1.5 percentage points year-on-year due in part to component shortages that may continue into the fourth quarter (See Table 1). Nokia faced pressure at the high end from competitors' new smartphones, so even as it rolled the N97 out to more countries in the third quarter of 2009, its ASP remained flat quarter-on-quarter at €62. Nokia should have strong end-of-year volumes as a result of good mid-tier products like the 5530 and 5230, but consumers seeking to upgrade to a high-end device may look elsewhere over the Christmas holiday sales.

Samsung had a strong third quarter of 2009 with touchscreen devices, qwerty phones and smartphones driving sales in the mature markets of Western Europe and the US. It also refreshed older products making steady sales in emerging markets. The introduction of mid-tier products such as Corby will help during the Christmas sales season. LG showed solid performance across the market with its competitively priced touchscreen and messaging phones like the Cookie and KS360 but most of its sales were of mid-tier phones, in part due to its lack of a smartphone portfolio.

Motorola had a difficult third quarter 2009 as the market waited for products that it planned to launch in the fourth quarter. Similarly, Sony Ericsson's sales deteriorated further in the quarter as strong competition almost halved its market share and the vendor built a slight inventory during the quarter.



"Smartphones continued to represent the fastest-growing segment of the mobile-devices market and we remain confident about the potential for smartphones in the fourth quarter of 2009 and in 2010," said Ms Milanesi.

Nokia’s share of the worldwide smartphone market reached an all time low in the third quarter of 2009 at 39 per cent, compared with 45 per cent in the second quarter of 2009 (see Table 2). This decline caused Symbian to lose ground too, while Research In Motion reached 20 per cent share, its highest yet. RIM’s sales volumes rested on the Curve 8900 in Europe and the Tour and Storm 2 with Verizon Wireless in the US. RIM also focused on pre-paid sales and more flexible BlackBerry Internet Service offerings, which helped to drive volumes in emerging markets like Latin America.

Apple’s worldwide smartphone share reached 17 per cent as iPhone sales totalled 7 million units in the third quarter of 2009 following the continued rollout of the iPhone 3GS in new countries. Its ASP is holding steady and sales in the fourth quarter should be even stronger as Apple starts selling in China, through one additional carrier in the UK, and in an additional 16 countries.

In the smartphone operating system (OS) market,Android picked up momentum but with only a handful of Android devices available, its share remained modest at 3.5 per cent. Windows Mobile 6.5 only became available in October, too late to have an impact on the third quarter, so sales of Windows-based smartphones saw another decline.

"Manufacturers should work to differentiate their user interfaces by creating distinct ways of organising users’ information and services," said Roberta Cozza, principal analyst at Gartner. "However, they need to be careful to maintain application compatibility."

"Mobile phone vendors must invest in their smartphone portfolios to benefit from the fastest-growing segment of the market and that which is most resistant to low ASPs," Ms Milanesi said. "They should also focus on winning developers and carrier support which will both attract users."